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⚡Bitcoin ETFs Break Speed Records🥉

Croxroad

25 Jan 2024 — 4 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

🪵 Record-Busting ETF Performance

Grayscale's Bitcoin ETF, known as GBTC, had a bit of a rough start. After it launched, they decided to sell off more than 80,000 Bitcoins in just a few days. It's a substantial amount, valued at around $3 billion. Now, here's the interesting part: while GBTC was doing its sell-off, nine other Bitcoin ETFs were on a shopping spree, grabbing over 100,000 Bitcoins combined.

The big players in this buying frenzy were BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC). Together, they snagged around 66,000 Bitcoins. To put it in perspective, their combined purchase in just seven days makes up more than half of what MicroStrategy, a giant Bitcoin investor, collected over three years.

MicroStrategy, for comparison, took almost a year to hit the 100,000 Bitcoin milestone starting in 2020. At that time, they announced holding around 105,000 Bitcoins by June 2021. So, you see, these ETFs moved pretty quickly.

Now, GBTC's selling spree caused a bit of chaos. Bitcoin's price took a hit, dropping almost 20% from over $48,000 on January 11 to about $38,700 on January 23. Some people think the massive sell-off by GBTC might be linked to the collapsed FTX crypto exchange selling off a huge chunk of GBTC shares.

Another factor could be GBTC's high trading fees, which are around 1.5%. In comparison, other ETFs have much lower fees, ranging from 0.2% to 0.4%. So, some analysts believe that investors might have pulled out of GBTC because of these higher fees.

2️⃣ Tapscript's Evolution

BitVM, a solution for enhancing Bitcoin scalability, recently revealed that within the Bitcoin blockchain, there are currently various Layer 2 projects gaining traction. These projects encompass diverse functionalities such as side chains, off-chain computing, and rollups. The BitVM community highlighted these developments on a Wednesday, emphasising the potential impact on Bitcoin's utility and demand in the market.

In simple terms, a Layer 2 chain is like an additional layer built on top of the primary blockchain (Layer 1), in this case, Bitcoin. What's interesting is that these Layer 2 protocols leverage the security of the underlying blockchain while significantly improving its scalability.

According to BitVM's data, multiple publicly available Layer 2 chains exist, and a recent Tapscript upgrade now enables the verification of various scripts to determine if unspent transaction outputs (UTXOs) can be spent. The community anticipates the introduction of more than 100 Bitcoin Layer 2 chains in the current cycle.

The emergence of these Layer 2 chains is expected to contribute to a positive narrative for Bitcoin prices, potentially attracting more traders to the Bitcoin chain and its network. This sets the stage for Bitcoin's expansion plans, with Layer 2 chains aiming to unlock Bitcoin's potential, particularly with the integration of the Taproot upgrade.

The Taproot upgrade, known for streamlining transaction processing, enhances the efficiency of the Bitcoin blockchain by increasing speed and reducing transaction costs. Tapscript, the scripting language associated with Taproot, plays a key role in these improvements.

One notable feature of Layer 2 chains is their ability to create assets on the underlying Bitcoin blockchain. Experts at BitVM even suggest that, in the future, the Bitcoin ecosystem could surpass Ethereum in this aspect. However, detailed insights on this claim are eagerly awaited, and the release of Layer 2 chains on the Bitcoin blockchain is anticipated to provide more clarity on their impact and scalability potential.

🛞 Why Does Bitcoin Halve?

Bitcoin undergoes halving events due to the intentional design of its software, a creation attributed to the mysterious entity or group known by the pseudonym 'Satoshi Nakamoto.'

While Satoshi never explicitly detailed the motives behind halvings, speculation suggests that the system was structured to expedite the coin distribution in the early stages. The goal was to incentivize individuals to join the network and participate in mining new blocks. The theory posits that halving the block rewards at regular intervals was a strategic move, anticipating that the value of each coin would likely increase as the network expanded.

Another perspective suggests that halvings were implemented to introduce deflationary elements into Bitcoin. This means the number of new coins generated per block is predetermined. In contrast to traditional fiat systems susceptible to overprinting by central banks, Bitcoin's fixed total supply of 21 million coins, coupled with the predictable rate of new coin creation, acts as a hedge against the risk of currency devaluation.

However, critics argue that Bitcoin's design, including halvings and the finite supply, may foster a tendency among users to save rather than spend. This behaviour, driven by the anticipation of coin value appreciation over time, has been linked to boom and bust cycles, where users accumulate coins only to cash out at specific market levels.

Some critics go further, likening Bitcoin to a pyramid (Ponzi) scheme. They assert that the system's design disproportionately rewards early adopters, contributing to the perception that those who entered the Bitcoin ecosystem early on have gained significantly more than latecomers. This perspective has fueled debates about the inherent fairness and long-term sustainability of Bitcoin's economic model.